The Economy Is in Long-Run Equilibrium

question 22

Multiple Choice

The economy is in long-run equilibrium. Suppose that automatic teller machines become cheaper and more convenient to use, and as a result the demand for money falls. Other things being equal, what would we expect will happen to the price level and real GDP in the short and long run?

• A) In the short run, the price level and real GDP would rise, but in the long run they would both be unaffected.
• B) In the short run, the price level and real GDP would rise, but in the long run the price level would rise and real GDP would be unaffected.
• C) In the short run, the price level and real GDP would fall, but in the long run they would both be unaffected.
• D) In the short run, the price level and real GDP would fall, but in the long run the price level would fall and real GDP would be unaffected.

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Definitions:

Better Than Anticipated

Results or outcomes that surpass the expected or forecasted standards.

Desired Situation

The optimal state or condition that a person, group, or organization aims to achieve in the future.

Actual Situation

The real and current state of affairs or conditions, as opposed to theoretical considerations or expectations.

Financial Bottom Line

A reference to the net income, profit, or loss reported at the bottom of a company's income statement.